Stakeholder engagement is central to the evolution of CSR. The debate is centred around: how or if stakeholders need to be managed? and if so, how or when you choose to communicate with them? (Reich, 1998, Vogel, 2005). For most companies a broad approach to stakeholder engagement introduces a high degree of complexity that most would rather do without, but there are ways of formulating and engaging in meaningful relationships that can create long lasting value for the company.

One way of engaging is to invite stakeholders to participate in the development of the business in key areas of mutual interest. Starbucks’ relationship with Conservation International to promote sustainable coffee production and fair-trade practices (Austin & Reavis, 2004) is one such example. For the NGO it gives needed exposure to the organisations key mission and for the company, in this case Starbucks, it gives positive exposure and a confirmation on the image as being committed to sustainability. In addition, it can create large saving for the company. E.g. the normal employee turnover rate is around 200% in retail while at Starbucks is it only 65%-70%. In monetary terms it costs the company 500$ to train a new recruit (Austin & Reavis, 2004:3), so huge savings can be made. While there is no direct link between the corporate sustainability and fair-trade practices and its ability to create a nourishing working environment, the active CSR strategy by Starbucks does differentiate the company from others and make it more attractive also to its employees.

If only the world could be more transparent it would be a much better place to live in. Companies would behave more responsible, Governments would be able to enforce rules, regulate much more effectively and people in general would have a much better idea about the powers influencing their everyday lives.

Transparency has been the mantra of the CSR movement we have hailed the word on numerous occasions on every seminar I have ever attended. When companies have come to us we have told them that If only they were a little more transparent they would not be in the mess that they are in right now! Or we have preached to them that the only way to protect themselves is if they can report on a few more indicators in order to quantify their processes and show that they are truly sustainable.

I have worked with these systems for the past 15 years and I know every one of them from A to Z. I wake up at night reciting ISO26000 on Concepts, Terms and Definitions and I know the weak points in the Global Compact and all the companies that cut corners to be part of the sustainable business movement and being FB pals with Ban Ki-Moon.

On of my friends Michael Koploy send me an entry he made on 5 Questions to Start the Sustainable Supply Chain Conversation and it made me thinking about some of the things that we continue to talk about but keep missing. He does argue for more transparency, as we all do, but also that we should take a look beyond the apparent and into the DNA of the company. The “what are we all about”-question of sustainable business. How do we get managers to think for themselves, their business and the society that they are part of at the same time?

We produce incentive plans and bonus schemes, but it did little or nothing to prevent greed and poor ethics during the initial stages of the financial crisis. We created lists of “good” companies, but they do not seem to do much better than the ones that are “bad”. We have systems upon systems that produce endless reports that only a handful of people actually read. So what is the answer to creating a sustainable DNA for business leaders?

Well for starters we should take a good hard look at our educational system both the public and private ones. What are we actually teaching our coming leaders about how to run a business? Are we teaching them how to create a sustainable business model in more than financial terms or have our business schools and universities become temples of past ideologies? I do not talk about revolution or throwing professors out on the streets (even though some of them might need to go that way), but about taking a hard look at what we actually teach our students. We know that blindly following the thinking and guidelines of Keynes, Hayek or Friedman only works in the short run (Keynes smiles) so why not take that insight seriously and bringing it into the lecture hall.

Secondly we need to make shareholders/owners accountable. It will be a significant step away from what we have been used to be doing until now and nothing like business as usual. For too many years one could have an ownership form where one could own a company but not be accountable for its actions. We appoint a board of directors, but we do not really care who they are or what they are doing, as long as they keep producing the results that we want them to. In the process they become complacent and distant from the decision making process. And when things eventually go wrong they are often caught unaware of what have been going on right under their noses.

It would be presumptuous of me to say that I have all the answers, but I do know that its takes more than measuring to create a sustainable business as Michael points out. CSR is more a symptom of a financial ideology that have been over interpreted and gone wrong than an independent movement. Our never-ending quest for accountability and transparency will not succeed until we realise that we need to make some changes to how business operate and we do not do this by replacing with just another ideology.

For the past few months I have been working on a project that should end up in a management system that would support the 10th principle of the Global Compact.

While we in many ways have embraced the potential that these changes have brought with them, there are also worries that the face of corruption and fraud will change in much the same way. Just as new possibilities for wealth creation have emerged, so have new avenues and possibilities for Bribery, Fraud and corruption.

Some efforts have been made to combat the increase in corrupt behaviour, which in themselves are good and live up to some of the very principles that we think highly off. But at the same time, there seems to be no decline in world corruption or fraud for that matter.

The 10th principle of the UN Global Compact concerns the subject of Corruption and how organisation deals with the subject. According to UNs own communication, this has been and continues to be the most difficult area to work with. While most signatories of the GC have identified the area as being a major obstacle in their work, very little evidence has been found that companies are effectively combating corruption. For instance only 20% of signatories had an anti-corruption policy that related to their own supply chain.

The OECD Convention on Bribery of Foreign Public Officials in International Business has created a framework from which business, governments and NGO can work together to combat corruption. And while the charter does subscribe a way for business to understand and articulate how corruption affects their operation it does not give any concrete advice on how anti-corruption work should look like in the field.

The aim of the Copenhagen Charter is to remedy this discrepancy and create a real, tangible and systematic approach to anti-corruption work in business and organisation in general. Based on these guidelines I have been part of the process of formulating and creating a working platform from which such work could be undertaken. The process have led us to a point were we now have 13 core principles and a auditing-system from an were BFC effort can be undertaken.

The principles are:

Ensure that a Code of Ethics or Code of Conduct is implemented which is inline with international institutional norms and which promote high ethical standards.

Codes of ethics form the backbone of the organisations work against corrupt and fraudulent behaviour. It formulates the practical guidelines that all employees need to follow within the organisation in order to comply with the guidelines set by the board and executive management. Both corruption and fraud can be difficult to identify and employees in the field need to know exactly what the corporate policy is for accepted behaviour for receiving or giving gifts or how to bid for contracts. A Code of Conduct helps the employee take decisions and identify situations, which can lead to issues of concern.

Organisations implement a sufficient level of financial and operative independence. Furthermore the organisation needs to implement internal and external audit coverage with the aim of uncovering corruption and possible fraud.

Auditors should be able to operate freely within the organisation. Even though most audits do not uncover corruption or fraud, is the independence of auditors send a powerful message to would-be whistle-blowers that an independent and unbiased system of control exists.

Develop a system that encourages both employees and managers to communicate and report, to the relevant independent body all irregularities. Implement a procedure that ensures that these reports will be taken serious by the receiver, who has the power and authority to do investigate the claim.

Implement an effective communicative system with local and regional authorities that ensure that the organisation’s work is transparent and auditable by both governmental and organisational auditors.

Working together with local and national governmental agencies will enable one to create a system which is transparent and auditable not only by the organisations own auditors but also from third parties. Third parties will have other ideas and insights into local conditions, which is hard to get insight into as an international corporation.

Organisations need to work with government officials and organisations in order to create guidelines and systems for disclosure of governance practices and transactions between the two parties.

It is the obligation of both the company and the governmental agencies that it works with to disclose as much information about their transactions as necessary to prevent dishonest behaviour. However, a system is needed in order to efficiently and effectively spread information to the relevant stakeholders’, in this case governmental agencies, who have a interest.

Designated and qualified staffs within the organisation have to play an active role in evaluating the efficiency and effectiveness of financial and internal control systems on a regular basis. On a regular basis they need to follow up on recommendations related to Corruption and Fraud Detection.

Like any other monitoring system, a systematic approach to anti-corruption and fraud monitoring and detection, needs some form of efficient mechanism for updates. The ways in which these types of acts are committed is constantly changing and is being developed mainly because corruption and fraud is a crime in most countries and perpetrators have to develop their techniques in order not to be prosecuted.

The organisation needs to focus its control and audit strategies more on areas and operations prone to fraud and corruption by developing effective high-risk indicators, which can be effectively measured and managed.

What gets measured gets managed is a old saying within management, but one needs to know what to measure before an effective system can be put into place. Every company and industry is different and subject to their own dynamics and business culture. Within fraud and corruption there are no universal system that can just be implemented.

In order to effectively combat devious behaviour one must incorporate the dynamics of the business if one is to be successful. It is therefore essential that any system is based on local and industry knowledge and that people with the appropriate competencies are involved in the formulation of the systems indicators.

Use multiple communications means to distribute your audit reports and invite stakeholders to participate in the investigation and establishment of a transparent organisation.

One of the most effective anti-corruption and fraud systems that can be implemented is to invite everybody to look inside, so that a critical look can be taken on the audit process. An auditor who thinks he knows everything knows nothing and by inviting stakeholders to participate in the continued investigation, one can create a basis of continued evaluation and transparency in the organisation.

Communicate in a language that stakeholders of the organisation understands

If you communicate in a way, which alienates your audience, you will never be able to reduce corruption in your organisation. One might argue that using technical language will be more accurate and the from a legal point of view it would be more correct but the fact is that if you want people to read and understand what you are trying to say, then the reporting needs to be understandable.

Use a network approach to combating corruption and fraud.

White-collar crime is a cross border discipline and as with the rise of globalisation, there is a need for business to learn, share and exchange knowledge from other parts of the world. No organisation is an island and if the business is divided on the fight on corruption and fraud it will ultimately loose the battle. Using a network approach and gartering resources from all levels of the organisation to be the eyes and ears of the organisation enables a much more effective intelligence on what is going on. While the information gathered might not directly lead to disclosure of crime, it highlights areas where there could be parts of the system which are not transparent and therefore can be subject to covering up wrong doing.

Ensure that systems for the effective exchange and proliferation of knowledge are ensured both inside and outside the organisation.

Like the network approach can be used to gather information, it can also be a effective way to communicate with all parts of the organisation. In the information age, organisations need to have a reliable system for communicating with key stakeholders in order to combat rumours and getting a voice in a otherwise overcrowded media scene. If a company is branded as being corrupt or subject to large-scale fraud, it can cost its ability to conduct business and if it needs to establish channels of communication after the event, it will often be too late.

Ensure that the systems for evaluation and incentives for management are established which support anti-corruption and fraud efforts in order to motivate employee ethical behaviour.

One of the major issues within corporate incentive plans is that they have often led to or initiated corrupt behaviour because of their design. The way in which companies compensate their managers and executives, have to be designed in a way that reduces the possibility of corrupt or fraudulent behaviour from occurring. This can example is through improved transparency in the incentive governance structure or third part validation of performance indicators. In high-risk regions, a managerial and specialist rotation program can also be in place in order to reduce the chance that top executives becomes too involved in the local business culture.

Ensure that the organisation proactively functions as an example to be followed on fraud and corruption through international committees and working groups.

The ability to be innovative and more efficient is not only limited to other areas of business but also just as much within the field of auditing and governance. As knowledge within the organisation about fraud and corruption is increased, so is the ability to find new ways and systems for efficient governance in these areas. Working cross-culturally and tapping into these streams of knowledge allows an organisation as a whole to progress and innovate new ways to manage these areas. A committee function allows for effective management and the development of best practice techniques that eventually can find its way into the Code of Ethics or as part of the audit process system.

Amazon have made a survey of purchases across the US and have found that some places are more environmental aware than others. Using its sales figures Amazon has found out which states are purchasing the most environmentally friendly products. The study showed that California, New Hampshire, and Vermont are the places that purchase the most sustainable products across all categories, compared to the national average.

The analysis also looked at Water conservation, Energy savings, Organic foods and Green Parenting. Based on purchases of environmental books, Vermont, Montana, and Washington, DC residents top our list of Most Well-Read Environmentalists. On a local level, Missoula, Montana residents just might be way more environmentally knowledgeable than the rest, with well over five times the national average of environmental book purchases.

Acording to Amazon they see the analysis as evidence that”The regionality of Amazon’s maps is evidence against the tendency to think of the Internet as an enabler of irresponsible, far-flung purchases. Yes, the Internet does make it possible for people to buy extravagant things from exotic places. But it also makes it easier for people to find things they need to live greener lives at home. And that’s what Amazon’s customers are doing, wherever their home happens to be.”

At least I found the evidence interesting even though that the internet has made the world more flat and that we have become victims of our own consumerism. You can judge for your self.

just came back from a two day seminar in Sweden on CSR in difficult markets. It was the first time that we ran this specialized course and even though we have significant experience within our respective fields we where a bit nervous if the outcome would be satisfactory. The CSR gender groups consist of people from the business world and professionals from the development community. Two groups under normal circumstances would not meet in some conditions are even perceived as having opposing goals.

The diverse group has on average over 15 years of experience within their field, so there is no doubt that we could do the job within our professional fields, but were we also able to merge the two worlds? We have been working with the material for about one month and had come up with a basic approach that would enable us and the participants to travel the many areas of contact between business and development operations. We opted for a risk management approach on the business side and a contextual analysis and stakeholder engagement on the development.

In essence we went through the following general areas:

Brief history and background on CSR

Development and difficult markets (Development are never active in anything else than what would be perceived as a difficult context)

A structured approaching risk management as in addressing Social Risk factors

Strategic approaches and lessons learned from working in difficult markets

We wanted to add some more on communication strategies when risks becomes issues that organizations have to deal with but we did not have time for this extra feature. In the courses to come we will however expand the course to include a half day more in order to include this very important feature. We also wanted to add a gender perspective to the difficult market context as it is one of the most salient issues that when having to deal with strategic problem solving in these areas.

I think the most important lessons learned from the course were that the development and business communities have a great deal to learn from each other when it comes to working in difficult contexts. First of all because the experience from the professionals in development can be directly used by business in order to produce countermeasures and control mechanisms that can reduce the risks that they are confronted with. Second, business has an impact on developing and emerging markets that development aid will never be able to match. The effect of foreign direct investments (FDI) in these areas imperative if some of these countries are over to overcome the social and structural challenges that they are faced with. Third, companies prefer risk free or low risk areas but through a structural approach they will be able to grown new business ventures were they in many instances will be first movers.

The potential for business-development cooperation is huge and there is no doubt that in the future we will see more public-private partnerships. But even beyond the just working together with in framework CSR there are new ideas to be explored that utilizes the business sense of the companies and the unique inside knowledge that development can bring to the table.

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A Intro to SRI Portfolio

Welcome to the Social Responsible Investments (SRI) Portfolio blog. The SRI portfolio blog is a place for news, research and personal reflection on the world of Corporate Social Responsibility (CSR) and Sustainable investments. I hope you will enjoy the journey.

The world of CSR and Sustainable business is ever changing and the rules of the game are being defined as we speak. The SRI portfolio blog is very much a personal reflection on the ever changing world of CSR and how it affects our every day lives, the organisations we are part of and the society we are living in.

In the world of CSR there are many “truths” which everyday consumers and business people have a hard time deciphering. It is my hope that you will find the blog both inspiring and informative, and maybe even gives you a chance to reflect on the subject what sustainable business really entails when all the communicative spin is pealed off.